Understanding Property Taxes

Overview

Most people never think about property taxes until they make the decision to buy a home. Even many longtime homeowners do not fully understand the property taxes that they pay each year. Some common questions regarding property taxes are:

  • What exactly are property taxes?
  • How are they calculated?
  • What are they used for?
  • How are they paid?
  • What does ad-valorem mean?
  • What is a millage rate?

This post answers these questions and explains the fundamentals of property taxes. Specific examples from Hillsborough County are detailed to ensure you know what to expect when your first tax bill is due.

Property Tax

A property tax is simply a tax on real estate. For Hillsborough County (and most counties nationwide) and the city of Tampa this is the primary means of revenue. Other forms of revenue include sales taxes (1% for Hillsborough), fuel taxes, and vehicle registrations.

Most property taxes are an ad-valorem tax (Latin for ‘To the value’), meaning that the amount of tax paid is based on the value of the property. The more expensive the property is, the more expensive the tax bill will be. Every year the county appraises the value of all properties to account for the changes in market value. Therefore each year your tax bill will change.

There are also non ad-valorem taxes, or taxes not based on the value of the property. The city of Tampa, for example, leverages a non-ad-valorem tax for management and maintenance of the stormwater system.

Tax Districts

A single county may be divided in to multiple separate tax districts. A tax district is a geographical area that has the same tax calculations within. For example Hillsborough County has four tax districts:

  • City of Tampa
  • City of Temple Terrace
  • City of Plant City
  • Unincorporated

Each of these districts has a different tax rate, but they are relatively similar to each other. Pinellas County, on the other hand, has around 50 tax districts. There is also a much larger difference in tax rates between the lowest taxed and highest taxed district compared to Hillsborough.

Why are there different tax districts? The different districts generally correspond to different incorporated municipalities within a county. These municipalities provide their own administrative services. For example, the city of Tampa provides its own police force, while Brandon (Unincorporated Hillsborough) utilizes the county police force.

A section map of Hillsborough County highlighting the different tax districts is available on the Property Appraiser website at https://www.hcpafl.org/Downloads/Maps-Data.

Taxing Authorities

A taxing authority is a government entity authorized by law, in this case the Florida Constitution, to levy ad valorem taxes. Some of the taxing authorities are state designated and are common among all districts in Florida, and others can be specific to a particular district. The taxing authority is what establishes the rate that a property will be taxed. These rates are set each year, usually in September, for the upcoming year. 

The Hillsborough County taxing authorities and contact information is available at https://www.hcpafl.org/Property-Info/Taxing-Authorities. The property tax is specified as the amount per $1,000 of assessed value. This is referred to as the millage rate (from the Latin ‘mille’ meaning one thousand). For example, a millage rate of 19 would equal $19 dollars for every $1000 of assessed home value. A $300,000 property would have $5,700 of ad valorem taxes. It is important to note that there are exemptions, such as the Homestead Exemption, available that reduce the assessed value and accordingly the final amount of taxes.

The following table shows the final millage rates by each taxing authority for Hillsborough County broken down by tax district for the 2016 year.

The following chart illustrates the percentage of taxes that go to each authority for the City of Tampa tax district. General county revenue, City of Tampa municipality, and public schools account for 90% of the taxes.

Detailed information of the county and municipality budgets can be found in their respective operating budget books.

Property Appraiser

The property appraiser is responsible for assessing the values (as of January 1) of all the properties in the county. The appraiser is not responsible for levying taxes or collecting taxes, those are duties of the taxing authorities and tax collector.

A very useful tool provided by the property appraiser is a publically available database of all property in the county. One can easily lookup the assessed value, tax district, sales history, owner information, and building specifications for a home.

The following image is a snapshot from the Hillsborough County Property Appraisers website of a home in South Tampa.

Visit the Hillsborough County Property Appraiser website at https://www.hcpafl.org/ for more information. To search property records simple click on the search menu item or go directly to http://gis.hcpafl.org/propertysearch.

Homestead Exemption

The State of Florida Homestead Exemption allows homeowners to exempt up to $50,000 of assessed value on their primary residence. This exemption directly lowers the amount of property taxes paid. The first $25000 of assessed property value is exempt from all taxing authorities. There is no exemption on the next $25000 ($25000 to $50000). The next $25000 ($50000 to $75000) is exempt from all taxing authorities except for public schools. The typical South Tampa home has an assessment greater than $75000 and will receive the maximum benefit.

The following table shows the calculation of property tax for a property with and without the Homestead Exemption in the city of Tampa.

To qualify for the homestead exemption for the current tax year the property must be owned and used as the primary residence on January 1st. If the property is not the primary residence at this time, the exemption will be available starting the following year.

In addition to lowering the taxable value of a property, the Homestead Exemption places a yearly cap on the assessed home value. This is referred to as the “Save our Homes” benefit. The cap is either 3% or the Consumer Price Index (CPI), whichever is lower. This benefits the homeowner by keeping the property taxes from increasing proportional to the property value over time. The following figure is a capture from the property appraiser site for a home in Tampa that was purchased in 1989.

The benefit accrued from the yearly assessed value increase limit is portable to a new property (up to $500,000 worth of benefit). This allows someone to sell their home and purchase another without losing the benefit. The following figure, provided by the Hillsborough County Property Appraiser, explains portability for both the case of upsizing and downsizing a home.

Payment

For homeowners with a mortgage, the bank generally will handle making the payment when due. This will come out of escrow funds that are collected each month along with the mortgage payment. Those without a mortgage or that do not escrow property taxes are responsible to pay the tax collector directly when due. The tax collector sends out the bill (Notice of Taxes) on November 1st and it must be paid by March 31st.

A discount is available for early tax payments.

  • 4% discount for payments made in November
  • 3% discount for payments made in December
  • 2% discount for payments made in January
  • 1% discount for payments made in February
  • No discount for payments made in March

The following figure is an actual tax bill for 2017 that shows the ad valorem taxes, non-ad valorem taxes, and reflects the discount of 4% for payment in November.

Key Dates

The following is a list of key dates throughout the year relating to property taxes.

January 1 Property Appraiser assesses property values
March 1 Homestead Exemption application due
July 1 Property Appraiser certifies values to taxing authorities
August 24  Property Appraiser mails Truth In Millage (TRIM) to taxpayers (proposed taxes)
October 10 Taxing authorities finalize millage
November 1 Tax Collector mails the bill (Notice of Taxes)
March 31 Last day to submit tax payment

Useful Resources

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